CEO pay squeezed, but millions still flowing
Australia’s top bosses underwent a pay squeeze in 2019 but one chief executive still reaped more than $35 million in pre-pandemic conditions, according to research released on Friday.
“It is encouraging to see that, after many years of engagement and scrutiny from investors, boards have applied a greater level of restraint," said Louise Davidson, chief executive of the Australian Council of Superannuation Investors.
![](/web/20200808180415im_/https://www.afr.com/assets/b4682377.gif)
IDP Education chief executive Andrew Barkla topped ACSI's list of highest-paid ASX 200 CEOs on a realised pay basis. Wayne Taylor
She pointed to ACSI’s research indicating that 25 chief executives of ASX 200 companies had no bonuses paid out in 2019, up from seven in 2018, while overall levels of bonus payouts had dropped.
“More boards are using sensible discretion to rein in outcomes for senior executives,” Ms Davidson said.
The research, conducted by advisory group Ownership Matters, showed that the realised pay of ASX 100 chief executives fell 8.2 per cent in 2019 to a median of $4.1 million.
The situation was reversed for ASX 101-200 bosses, whose realised pay rose 25.2 per cent to a median of $2.2 million.
That is still far better than the wage-slave: latest Australian Taxation Office figures state the median taxable income for Australians in fiscal 2018 was $45,882.
An ACSI spokesman said potential factors putting downward pressure on top level remuneration included fallout from the banking royal commission and some boards cutting the base pay of incoming chief executives.
Another factor he cited was the long-running impact of the two strikes rule – in which boards are rolled and forced to run for re-election if more than 25 per cent of investors vote two years in a row against a company’s remuneration report.
The realised pay figure used in the research for ACSI, an association representing 39 Australian and international superannuation and pension funds, excludes a chief executive’s share-based payments in the year but includes the value of any equity that vested – became usable – in that period.
The top-10 chief executive pay packages came from share prices rising in the period, ACSI said.
Topping the list with a $37.8 million realised pay result was Andrew Barkla of IDP Education, which places international students in English-speaking educational institutions.
“Almost all of Barkla’s realised pay came from the share price increasing from $2.65 at the time of listing in November 2015 to above $10 when he exercised 3.15 million options originally granted prior to IDP’s IPO,” ACSI said.
“These options were poorly structured from the outset – the exercise price was set at $1.44, well below the IPO price, and the absolute-[total shareholder return] hurdle applying to a third of the options was calculated using a base of $1.44.”
That meant, ACSI said, at the IPO price, the absolute-TSR hurdle of 8 per cent per annum compound to the end of 30 June 2018 “had already been comfortably met”.
Mr Barkla’s wealth will have come under pressure more lately, with him holding 257,000 shares alone and the pandemic stripping more than 45 per cent of IDP’s share price since February.
Another top 10 boss was Qantas’ Alan Joyce, at $12.2 million, which was “partly due to more tranches of equity incentives, granted at a time of much lower share prices, vesting at or close to maximum levels”.
Mr Joyce has been among bosses who have flagged he has not been taking a salary this year with Qantas decimated by the virus.
ACSI’s Ms Davidson, whose own pay rose slightly to $348,000 in 2019, said ASX 200 boards would need to “seriously consider” how pay would be perceived “given the widespread impact of the pandemic on investors, staff, customers, governments and other key stakeholders”.
Michael Robinson, a director with remuneration consultants Guerdon Associates, said the outlook for executive pay in the current financial year was tough. “For many boards, just setting targets … is next to impossible,” he told The Australian Financial Review.
He said some companies in Australia and overseas were examining shorter bands to compensate – three or six month periods – because of constantly changing business conditions.
He said some institutions, particularly in the UK, were also examining bonus grants of equity, requiring a five-year vesting period, to boost long-term management thinking.
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